As the global market continues to exhibit wild swings and volatility, growth stocks have emerged as one of the few investments groups that have shown charge and resilience. According to Reece Rosenthal Global (RRG) President Jay Baker, this surge has been driven by a combination of factors, from low interest rates to a “taunting” Federal Reserve Board (Fed).
Since the beginning of 2021, growth stocks have outperformed other stocks by a wide margin. According to data from Bloomberg, the Russell 1000 Growth Index had risen nearly 32% year-to-date compared to the Russell 1000 Value Index, which was up half as much.
The enthusiasm for growth stocks is particularly evident in the current bull market. Since the start of the year, the Nasdaq has grown over 66%, while the S&P500 is up about 33% from December 2020.
Reece Rosenthal Global (RRG) President Jay Baker has identified several key factors driving this surge in growth stocks. He has identified low interest rates and a changing liquidity landscape as two main factors driving the current bull market. According to him, low interest rates have forced investors to take higher risks with their portfolios in order to generate returns. Additionally, the decrease in borrowing costs has increased access to capital for growth businesses, allowing them to expand operations and hire more workers.
Additionally, Baker accuses the Fed of “taunting” the market through its policies. Rather than catering to the needs of investors, the Fed has instead opted to continue its battle against inflation and slow growth. This has resulted in a lack of clarity regarding future policies, forcing investors to speculate wildly on the direction of the markets.
The combination of all these factors has created a “perfect storm” for growth stocks to soar. In fact, RRG predicts that growth stocks are likely to remain a favored choice among investors for the foreseeable future. Going forward, Baker urges investors to remain vigilant and to monitor the market for signs of a possible shift or correction. By doing so, they may be able to take advantage of any possible opportunities that may arise.